Well here we are now with a shift in the market and they always seem to come rather suddenly.  We have announcements today from a number of lenders that their rates are headed up. This will surely spread to virtually all the banks within days.

So what is behind this?

5-year bond yields drive 5-year mortgage rates in Canada

The 5- year benchmark Canadian Bond yield as of today Nov 6 is 1.04%  It has been as low as 0.6% in mid-September, and as high as 1.5% in January 2015, so quite a large range there.  This latest rise has bit into the spread lenders want to achieve, so we are now beginning to see increases in mortgage interest rates.

It seems to me the banks these days are less predictable than at any time in my memory as to just what yield they want, which makes it harder than ever to predict interest rate movements.

What is happening in the rest of the world and how does that impact us?

Bond markets around the world have been experiencing slowly increasing interest rates for the last few weeks.  The big bond traders around the world trade hundreds of billions of dollars in bonds daily seem to be pricing in an increase in the US Fed Rate in December.

If the US Fed does increase its overnight rate ,which has direct impact on variable rates, we will continue to see the variable discount decrease.  We are already off from the Prime less 0.65% rates we saw in the busy summer period.

Conclusions and Recommendations

This may be the beginning of a larger and longer move up, or it may just be a small adjustments. Hey, rates could even head back down next month, as we have seen happen over the last couple of years. World events can change markets very quickly and sometimes to large effect.

For Buyers on the fence, lock in a Rate Hold to protect against rate increase  for as long as 120 days.

For Borrowers with variable rate mortgages who have been planning to lock those mortgages in to a fixed rate when the fixed rates go up, now is a good time to review that plan.